Understanding Sale of Goods and Its Legal Framework
A contract of sale is one of the most common and vital commercial transactions. It involves the transfer of ownership of goods from a seller to a buyer for a price. However, for the transaction to be fair and valid, the law ensures that certain conditions and warranties are automatically applied, even if they are not expressly mentioned in the contract.
These are known as “implied conditions and warranties.” They form part of the Sale of Goods Act, 1930, particularly under Sections 12 to 17. The main objective behind implying these terms is to protect the interests of buyers, ensure quality and fairness, and promote commercial integrity.
In this article, we will explore the meaning, types, and legal importance of implied conditions and warranties, supported by real-life illustrations and easy-to-remember mnemonics.
Meaning of Conditions and Warranties
Section 12 – Distinction Between Condition and Warranty
According to Section 12 of the Sale of Goods Act, 1930,
- A condition is a stipulation essential to the main purpose of the contract, the breach of which gives the buyer a right to repudiate (reject) the contract and claim damages.
- A warranty, on the other hand, is a stipulation collateral to the main purpose of the contract, and the breach gives rise only to a claim for damages, not the right to reject the goods.
Example
If a buyer orders a “new iPhone” but receives a used one, it is a breach of condition — the buyer can reject it.
If the buyer receives a new phone but the charger is missing, it is a breach of warranty — the buyer may claim compensation but cannot reject the entire contract.
Implied Conditions under the Sale of Goods Act, 1930
The law recognizes several implied conditions that automatically apply to every contract of sale unless specifically excluded by the parties.
1. Condition as to Title (Section 14(a))
There is an implied condition that the seller has the right to sell the goods. In other words, the seller must be the true owner or have authority to sell.
If the seller has no right to sell and the buyer loses possession, the buyer can recover the full price and claim damages.
Example:
If X sells a stolen car to Y, and the true owner later claims it back, Y can recover the purchase money from X since the sale violated the condition as to title.
2. Condition as to Description (Section 15)
When goods are sold by description, there is an implied condition that the goods shall correspond with the description given by the seller.
This protects the buyer from being misled by inaccurate descriptions.
Example:
If a seller agrees to sell “100% cotton shirts” but delivers polyester shirts, the buyer can reject them because they do not correspond with the description.
3. Condition as to Sample (Section 17)
When goods are sold by sample, there is an implied condition that:
- The bulk shall correspond with the sample,
- The buyer shall have reasonable opportunity to compare the bulk with the sample, and
- The goods shall be free from any hidden defects that make them unmerchantable.
Example:
If a cloth sample shown is smooth and durable, but the supplied bulk is rough and inferior, the buyer can reject the goods.
4. Condition as to Sample and Description (Combined Sale)
When goods are sold by both sample and description, it is not enough that the bulk matches the sample — it must also match the description.
Example:
If a seller shows a sample of “red silk cloth” and delivers red cotton cloth of the same texture, it breaches this condition.
5. Condition as to Fitness or Quality (Section 16(1))
As a general rule, the buyer must take care (“caveat emptor” – let the buyer beware).
However, there is an implied condition that the goods shall be fit for the purpose if:
- The buyer informs the seller of the purpose, and
- The buyer relies on the seller’s skill or judgment.
Example:
If a buyer asks for a paint suitable for outdoor walls, and the seller provides indoor paint that fades quickly, the seller is liable for breach of condition as to fitness.
6. Condition as to Merchantable Quality (Section 16(2))
When goods are bought by description from a seller who deals in goods of that description, there is an implied condition that the goods shall be of merchantable quality, i.e., fit for sale under ordinary circumstances.
Example:
If a person buys a tin of canned juice, and upon opening it finds it spoiled, the goods are not of merchantable quality.
7. Condition as to Wholesomeness
Especially in the case of food and consumables, there is an implied condition that the goods shall be wholesome and safe for consumption.
Example:
If a bakery sells a cake containing a harmful ingredient causing illness, it breaches the condition of wholesomeness.
Implied Warranties under the Sale of Goods Act, 1930
Alongside conditions, certain warranties are automatically included in every sale to safeguard the buyer’s interests.
1. Warranty as to Quiet Possession (Section 14(b))
There is an implied warranty that the buyer shall enjoy peaceful possession of the goods without disturbance from the seller or any third party claiming superior title.
Example:
If the seller later claims back the goods or a third party asserts ownership, it amounts to breach of this warranty.
2. Warranty Against Encumbrances (Section 14(c))
The goods sold must be free from any undisclosed charges or encumbrances in favor of third parties. If such a charge exists, the buyer can claim compensation.
Example:
If a car sold by the seller is subject to an unpaid loan but the buyer was not informed, the seller breaches this warranty.
3. Warranty to Disclose Dangerous Nature (Judicially Recognized)
When goods are inherently dangerous, and the buyer is unaware of the danger, the seller must warn the buyer.
Example:
If a chemical seller fails to warn that a substance is flammable, and the buyer is injured while handling it, the seller is liable for breach of warranty.
Real-Life Example: Application of Implied Conditions and Warranties
In Priest v. Last (1903), the buyer asked for a hot-water bottle suitable for use. The bottle burst and injured him. The court held that there was a breach of implied condition as to fitness for purpose.
Similarly, in Grant v. Australian Knitting Mills (1936), underwear sold contained harmful chemicals, causing skin disease. The seller was held liable for breach of merchantable quality and fitness.
These cases emphasize the importance of implied conditions and warranties in ensuring consumer protection and commercial honesty.
Mnemonic to Remember Implied Conditions and Warranties – “TDS FMW QED”
Implied Conditions – “TDS FMW”:
- T – Title
- D – Description
- S – Sample (and description)
- F – Fitness for purpose
- M – Merchantable quality
- W – Wholesomeness
Implied Warranties – “QED”:
- Q – Quiet possession
- E – Free from Encumbrance
- D – Disclosure of Danger
Mnemonic Sentence:
“The Dealer Sells Fine, Marketable, Wholesome Quality Every Day.”
This mnemonic helps law students quickly recall the implied conditions (TDS FMW) and warranties (QED) — a smart way to score full marks in exams and write precise legal answers.
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